Mixing business and academia

In Australia, the largest universities are $2 billion enterprises with almost 8000 employees. The average revenue across the 39 universities is $500 million and 2500 employees.

Many universities would match a good number of the firms that comprise the Business Council of Australia, were they private corporations. Are universities becoming just like businesses, and should they be managed that way?

For some time past, the two worlds mostly stayed apart and the regret in each, to paraphrase Galbraith, was negligible. But the two are drawing together. The Tertiary Education Minister,
Chris Evans
, was recently reported as exhorting chancellors to “adapt to business needs".

Private management itself is gradually taking more and more to the notion of the learning corporation and starting to recognise that knowledge capital may be the key to competitive advantage in the Asian century. Universities also have adopted business-like management systems.

Many private employers still bemoan the university way. Why aren’t the graduates “work-ready" is a common refrain, or why aren’t their researchers “business-savvy"? The university reply is why aren’t businesses “graduate ready" and why aren’t they enterprising in seeking good ideas? But the match is joined.

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Conservative economic modelling shows that universities are producing an average 15 per cent real rate of return in terms of the earnings of graduates and more when social benefit is added. Research generates an average 20 per cent or more real rate of return in its economic effect. Such outcomes clearly pass public and private-sector hurdle requirements for investment.

Still, there is a growing dilemma. The more universities morph into businesses, the more immediately useful they are seen to be. But the more their blue-sky thinking and their socially critical analysis, which pays off in all sorts of osmotic hard-to-measure ways, can be subverted.

Universities have been long-lived because they meet a basic need for independent and considered reflection on the human condition and our world. The danger is that the more the managers rule, the less autonomous scholars will be able to produce the goods.

A tipping point may be close in Australian universities. By global standards, our public universities are among the most enterprising. Overseas universities look to our revenue diversification, such as from international students and public-private partnerships. There is interest in our pedagogical innovation where we lead in areas such as distance learning, English-language testing and work-integrated learning.

Our system strengths such as risk- management systems and insurance, are ahead of the game. The university broadband is Australia’s third largest telco and universities founded the internet in Australia. Spin-offs such as IDP, Navitas and Campus Living Villages are world players. Globally, there are twice as many Australian universities in The Times Top 500 Universities as Australian companies in the Global Fortune 500.

University managers have proven agile. Still, there is much more they should do. It would be splendid if business could commit jointly with universities to a scheme of enhancing knowledge management. It could give Australia its own leap forward.

If anything, this asks more of university managers than private business managers. Private managers can continue to seek profits, but more creatively. The university managers need to seek continuous improvement while being sensitive to the broader purposes of the university. Management that is sensitive to the different beat to which a university marches is crucial.

Having improved the art of management in universities, there is a danger in some such institutions that command and control has gone too far, particularly with the growth of managerial salaries and prerequisites and of internal micro-regulation. The hard task for university management is to get the balance right.

If universities can step back and reflect on that, while private management fixes its own backyard, which the Roy Green report for the Commonwealth Innovation Department shows is still very necessary, we could get some great productivity increases. Not a single new government program would be needed to deliver it.